Additional comments
Labor called for wage subsidies at the beginning of the pandemic to support vulnerable workers, businesses and communities, and we have been calling for broader labour market programs to encourage job creation and kick-start the recovery.
Labor welcomed the belated introduction of JobKeeper, but maintained the measure unfairly excluded many workers such as casuals and temporary migrants, and that JobKeeper is being cut in the middle of the deepest recession in almost a century and while unemployment is rising.
Unfortunately, the Government does not appear to have learned from the experiences of JobKeeper. The Government’s proposed JobMaker Hiring Credit suffers similar flaws—it leaves behind many businesses and their employees who used JobKeeper behind.
The Hiring Credit lacks the ambition required to drive the unemployment rate down quickly, particularly with its narrow eligibility based on age and payments received by employees.
The enabling legislation has little to do with the JobMaker Hiring Credit as announced in the 2020‒21 Budget. Rather, it amends the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 to allow the Treasurer to make payments and create schemes with the primary purpose of 'improving the prospects of individuals getting employment in Australia' or 'increasing workforce participation in Australia'.
Although Labor wholeheartedly believes active labour market programs should be created and sustained through the economic recovery with these goals in mind, virtually all design parameters of the JobMaker Hiring Credit—and any additional scheme the Treasurer should wish to introduce—are left to delegated legislation which the Treasurer can create with 'the stroke of a pen'.
Labor appreciates the need for some flexibility, however, the use of delegated legislation means the only option for Parliament to deal with objectionable new rules or unintended consequences is by a disallowance motion, rather than targeted amendments as normal legislative processes would allow.
Lack of ambition
Treasury confirmed in Senate Estimates hearings, of the 450 000 jobs expected to be supported by the hiring credit, only 10 per cent—45 000—are expected to be genuinely new.
There are 928 000 Australians who have been deliberately excluded from the JobMaker Hiring Credit as announced in the 2020‒21 Budget, which Labor believes will make the unacceptably long jobless queues even longer. Businesses that have struggled and relied on the JobKeeper credit are also unlikely to be in a position to take on new staff and expand as the JobKeeper subsidy is withdrawn.
As announced in the Budget, firms currently receiving JobKeeper are ineligible for the hiring credit, however they will be eligible if they stop receiving it and meet the headcount and payroll test. The Grattan Institute estimates one million employers that received JobKeeper are effectively excluded from the Hiring Credit scheme. Treasury were unable to provide estimates or assumptions on the numbers or types of firms that would have lost JobKeeper (either in its revised form or upon completion of the program in March) who would either make JobKeeper-subsidised workers redundant or would be able to take advantage of the Hiring Credit.
The Hiring Credit is likely to favour firms that have done well during the recovery, or were less hard-hit. Woolworths have clarified that they would not use the credit, however, many other large firms that have done well have not clarified whether they would use the credit.
These key facts illustrate the lack of ambition in the JobMaker Hiring Credit as announced.
Witnesses at the Committee hearings made similar observations. A non-exhaustive list of matter raised included:
The Hiring Credit will not be sufficient to bring unemployment down significantly and help the economy recover. An example of this was captured by Per Capita when discussing the boosting of employment through the scheme:
Our concern is that the scheme, as currently constituted, is not ambitious enough.
The subsidy level was not likely to be high enough to incentivise employers to take on new staff, particularly small businesses. The Council of Small Business Organisations Australia (COSBOA) stated in their submission:
Feedback from COSBOA member organisations indicates that the Hiring Credit wage subsidies are too low. Given the apparent complexity of the Hiring Credit administration process, for small businesses in particular the subsidy amounts are insufficient to motivate additional hiring.
The subsidy is most likely to be used by businesses that did comparatively well during the recession and are in a position to expand. This is reflected in the 90 per cent of subsidised jobs being ones that would have been created without a subsidy, as per Treasury’s Estimates testimony.
The narrow targeting of the scheme to workers aged 35 and under who had received JobSeeker, Youth Allowance or similar payment in the past three months results in the exclusion of older workers and employees who had been on JobKeeper. While this might be efficient in more normal circumstances, witnesses believe the severity of the current recession does not warrant such narrow targeting. Some stakeholders argued that employees who had received JobKeeper should be excluded from the 'additionality' baseline on payroll and headcount eligibility for the scheme, while others either urged expanded eligibility based on duration of employment (rather than age) or an abandonment of age-based criteria altogether.
No complimentary labour market programs have been proposed to assist workers older than 35, other than passing remarks about the existing Restart program for workers aged over 50—a capped program that has underperformed on a number of criteria, not least that fewer than half the participants remained employed after six months.
Women were more likely to be adversely affected by the narrow criteria. Women were less likely to be in the labour force pre-pandemic, and withdrew from the labour force in greater proportions than men during the crisis. A number of factors—including maternity leave, being carers, or ineligibility for social security payments due to partner income—are more likely to affect women, meaning they are more likely to be ineligible for the hiring credit as they return to the labour force. Removal of free childcare was also cited as another barrier to women returning to the labour force.
Safeguards and protections
Of significant concern to Labor Senators is that the design of the JobMaker Hiring Credit incentivises casual and insecure work. This is primarily due to the 20 hour minimum requirement and the same subsidy amount for any rate of work above 20 hours. There is no requirement for jobs to be permanent. Some stakeholders argued there is a potential to accelerate the use of labour hire firms who provide little job security or no entitlements (like leave). Ms Michelle O’Neil from the Australian Council of Trade Unions (ACTU) stated:
The potential for the replacement of existing workers with subsidised workers, the program prioritising the creation of short-term insecure jobs, the lack of any requirement that employers commit to paying legal rates of pay and complying with industrial health and safety laws as a condition of receiving the subsidy are all serious concerns which must be addressed.
The ACTU submission also made the point:
Another expression of the programme’s general encouragement of the creation of insecure work is that the additionality requirements proposed in the Budget factsheet provide no protections, and in fact the scheme’s design incentivises, the hiring of as many insecure part-time and casual workers as possible to fill any vacancy an employer will have in future. For example, under the programme as currently written, an employer with a number of vacancies which together represent 3 FTE (Full-time Equivalent) roles could hire 3 full-time workers and receive a subsidy of $600 a week. Alternately, they could hire 6 part-time or casual employees to fill the same vacancy and receive a subsidy payment of $1 200 a week—for the same vacancy and virtually the same outlay for the employer. This programme appears to be designed to produce insecure jobs, with no requirement that workers be kept on after the program has ended nor any incentive for employers to do so.
This was supported by Mr Gerard Dwyer from Shop, Distributive and Allied Employees’ Association (SDA):
We share the view of the ACTU that this program bears the hallmarks of some other programs in the past, where we have seen incentive to provide short-term insecure work.
A number of stakeholder suggestions were made to address these concerns, including making the subsidy based on a full-time equivalent rate or offering a higher subsidy for full time jobs. Some stakeholders suggested additional incentives could be offered to retain employees after the 12 month subsidy period has expired.
Treasury has argued that the combination of anti-avoidance provisions in the Act being amended, coupled with requirements that headcount and total payroll must increase, will largely stop ‘gaming’ of the credit by employers and ensure minimum conditions for subsidised new workers. Treasury also argued that existing laws are applicable, such as industrial relations laws that relate to matters like unfair dismissal.
However, the government does not appear to have created guidance or set up clear processes for workers to raise allegations of employer misconduct. As the program is administered by the Australian Taxation Office, worker-oriented stakeholders have recommended resources be allocated to assist workers in raising and resolving disputes with appropriate regulators. Union stakeholders urged clear and enforceable dispute resolutions based on Fair Work Commission processes.
Treasury’s responses do not allay Labor or many stakeholder concerns about minimum requirements to enable secure work, safeguards and dispute resolution processes, or compliance with occupational health and safety laws.
Treasury confirmed they had not consulted with the Age Discrimination Commissioner about the interaction with the Age Discrimination Act 2004, although they cited exemptions for the operation of government incentives and programs.
Stakeholders urged protections for whistleblowers. Treasury has assumed the ATO would set up a whistleblower hotline as they did with the JobKeeper scheme.
The government should include safeguards—particularly those related to dispute resolution processes—in the enabling legislation. The government should encourage and resource enforcement agencies appropriately to ensure employees are able to raise matters with enforcement agencies and have the confidence those concerns will be investigated.
Data and Evaluation
Virtually all stakeholders believed the Government should release data on the use of the Hiring Credit scheme (similar to the regular release of JobSeeker and JobKeeper data), and evaluation(s) of the program after three and six months of the program operating. This was highlighted by Mr Gerard Dwyer of the SDA and Ms Jennifer Lawrence from Master Builders Australia:
We believe there should be monitoring programs during the life of the subsidy program and there should be end-of-program data requirements so that we can make objective assessments of how the [inaudible] has actually worked.
We would recommend embedding the requirement for a six-and 12-month review process.
The Government should commit to an evaluation of the Hiring Credit relatively early in the operation of the scheme. The Government should commit to releasing timely and transparent data about usage of the credit, including aggregate headcount and payroll data, and breakdowns by demographics and region.
Small businesses
Small business stakeholders, while supportive of the scheme, said the level of hiring subsidy was not likely to tip marginal employment decisions in favour of taking new employees on. Some stakeholders suggested the Hiring Credit payments should be made monthly, rather than quarterly in arrears, to assist small businesses with their cashflow. Ms Jennifer Lawrence from Master Builders Australia makes the point:
We encourage as much flexibility as possible within the JobMaker requirements. The reason for that is to encourage particularly small business employers as much as possible to engage new workers. In this regard we note that the frequency of the reimbursement proposed for the JobMaker package is proposed to be quarterly. However, it is going to be facilitated through the same systems as JobKeeper, and therefore we believe there could be scope to make those reimbursements monthly instead, which could favour small-business cash flow management—which, during testing times like this, is of absolute importance.
Small business concerns included potential issues where an employee declares they are eligible for the scheme but may not be, and the interpretation of draft rules that noted that sole traders will be ineligible for the Hiring Credit, and the design of the rules means that a sole trader will need to employ two new employees (if the employed no one else as of 30 September 2020) to become eligible for one hiring credit subsidy. 60 per cent of small businesses are sole traders.
Small business and civil society stakeholders also highlighted the importance of employment services providers—often emphasising a local or regional approach to collaborating on placing jobseekers—to help the scheme function well.
The Government should consider the concerns of small business stakeholders and their ability to engage meaningfully with the scheme, including whether the size of a credit is a sufficient incentive, and clarifying the eligibility of sole trader employers.
Senator Alex Gallacher
Deputy Chair
Labor Senator for South Australia
Senator Jenny McAllister
Labor Senator for New South Wales
Senator Louise Pratt
Labor Senator for Western Australia